LEGISLATIVE FISCAL ESTIMATE
[Third Reprint]
ASSEMBLY, No. 4046
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JULY 3, 2024
SUMMARY
Synopsis: Extends certain accommodations for businesses participating in State
economic development programs.
Type of Impact: Multi-year increase in State expenditures.
Multi-year net impact on State revenues.
Agencies Affected: New Jersey Economic Development Authority.
Office of Legislative Services Estimate
Fiscal Impact FY 2025 & Annually Thereafter
State Expenditure Increase Indeterminate
State Revenue Net Impact Indeterminate
 The Office of Legislative Services (OLS) concludes that the bill will result in an indeterminate
increase in State expenditures and have an indeterminate net impact on State revenues over a
multi-year period. The OLS lacks the informational basis to project the magnitude and
direction of the bill’s countervailing State revenue effects.
 The bill will result in a State revenue decrease to the extent that businesses participating in
certain State economic development programs choose to waive the on-site requirements for
full-time employees at qualified business facilities because the waiver will allow businesses to
remain eligible for tax credits which they could not receive under current law.
 The bill will result in a State revenue increase associated with payments made by businesses
equal to 10 percent of maximum annual tax credit the business is eligible to receive for a tax
period, depending on certain circumstances. These revenues will be offset by increased State
expenditures because the bill requires the New Jersey Economic Development Authority to
distribute these payments to support certain economic development activities.
 The bill’s one-year extension of the deadline by which businesses participating in the Grow
New Jersey Assistance (GROW) Program and the Urban Transit Hub Tax Credit (HUB)
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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Program can terminate incentive agreements may result in State revenue increases to the extent
that these businesses would no longer receive tax credits for which they otherwise might have
qualified.
 The modification of incentive agreements by businesses participating in the GROW and HUB
programs will result in an increase in State revenues. Lowering the number of new and retained
full-time employees retained by these business will cause their tax credit awards to be reduced.
 The provisions of the bill allowing businesses to suspend their obligations under the GROW
and HUB programs will have an indeterminate impact on State revenues. The overall impact
of these provisions on State revenues will be driven by taxpayer decisions to claim tax credits
in future tax years. The OLS cannot predict how individual taxpayer decisions will impact
State finances in this regard.
 The provisions of the bill concerning the timing of tax credit utilization will have an
indeterminate impact on State revenues. The overall impact of this provision will be driven by
taxpayer decisions to claim tax credits in future tax years. The OLS cannot predict how
individual taxpayer decisions will impact State finances in this regard.
 The requirement to utilize certain tax credits in equal installments will also have an
indeterminate impact on State revenues. While this requirement may limit State revenue losses
in certain fiscal years, the bill may cause the State to experience revenue losses over a longer
period of time that it otherwise would under current law.
BILL DESCRIPTION
The bill provides certain accommodations to businesses participating in the Business Retention
and Relocation Assistance Grant Program, the Business Employment Incentive Program, the
GROW Program, and the HUB Program, each of which is administered by the Economic
Development Authority. Some provisions of the bill apply to all four programs, while others apply
only to the GROW and HUB programs.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that the bill will result in an indeterminate multi-year increase in State
expenditures and have an indeterminate multi-year net impact on State revenues.
Suspension of On Site Attendance Requirements. Under current law, businesses participating
in the Business Employment Incentive Program, Business Retention and Relocation Assistance
Grant Program, and the GROW and HUB programs are awarded economic development incentives
in the form of tax credits for meeting certain program thresholds. One of these program thresholds
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is the creation or retention of certain number of full-time jobs at a qualified business facility. The
number of jobs created or retained varies depending on the program and the location of the
qualified business facility. In order for a full-time job to be counted towards satisfying the program
requirements under current law, a full-time employee must spend at least 60 percent of their time
at a qualified business facility.
P.L.2022, c.134 allowed businesses to waive, for the period beginning July 1, 2022 and ending
on December 31, 2023, the requirement that a full-time employee who is employee by the business
must spend at least 60 percent of the employee’s time at a qualified business facility. A business
that elected the waiver must satisfy two criteria. First, any full-time employee employed by the
business was required to spend at least ten percent of the employee’s time at the qualified business
facility through the 2023 tax period. Second, the business was required to make a payment to the
Economic Development Authority in an amount equal to five percent of the amount of the tax
credit the business received for the 2022 tax period. The authority was required to use funds
received via these payments to support small business activities and downtown activation or
commercial corridor activities. P.L.2023, c.261 extended the deadline for choosing the waiver
option to March 31, 2024.
The bill allows a business to waive the on-site attendance requirements for any tax period
beginning on or after April 1, 2024. Under the bill, a business that elects to waive these
requirements the must satisfy three criteria. First, if a qualified business facility is located outside
of an enhanced area or a government-restricted municipality, any full-time employee employed by
the business must spend at least 40 percent of the employee’s time at the qualified business facility.
Second, the business is required to extend by two years the term of its commitment period beyond
the time set forth in the incentive agreement. Third, the business is required to make a payment to
the Economic Development Authority equal to 10 percent of the maximum amount of the tax credit
that the business may receive for the tax period. As under current law, the bill requires to use
funds received via these payments to support small business activities and downtown activation or
commercial corridor activities.
The OLS concludes that these allowances will result in a decrease in State revenues. Without
the changes to the on-site attendance requirement, these businesses would likely not be eligible to
receive tax credits because they would not satisfy all of the current statutory requirements of each
program; in this situation, a business could not use a previously authorized tax credit, thereby
increasing their State tax liabilities. Because the bill allows a business that elects to use the waiver
provision to remain eligible to earn the full amount of the tax credit awards, State revenues would
be lower than they otherwise would be under current law. The OLS cannot predict how many
businesses will use the waiver, or the total amount of tax credits that would be foregone if the
waiver were not allowed.
The OLS notes that these provisions will also increase State revenues because the bill requires
businesses that waive the on-site attendance requirements beginning April 1, 2024 to make a
payment to the Economic Development Authority equal to 10 percent of the maximum amount of
the tax credit that the business may receive for the tax period. However, these revenues will be
offset by an increase in State expenditures because the bill requires the authority to use these
payments to provide loans, guarantees, equity investments, and other forms of financing to support
certain economic development activities with municipalities that qualify as an enhanced area or a
government-restricted municipality pursuant to the Emerge Program Act. According to the
authority, Atlantic City, Paterson, and Trenton are considered to be “government-restricted
municipalities,” while Camden, East Orange, Elizabeth, Hoboken, Jersey City, Newark, New
Brunswick, Passaic, Paulsboro, and Salem City are considered to be “enhanced areas.”
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Termination of Incentive Agreements. During the COVID-19 public health emergency, the
Economic Development Authority allowed businesses participating in the GROW program to
terminate their program agreements any time before December 31, 2022 without the authority
recapturing previously distributed tax credits. P.L.2022, c.134 extended this accommodation to
December 31, 2023, commending with the 2020 tax period or any subsequent tax period ending
on or before December 31, 2023 and provided this same benefit to a business that executed an
approval letter under the HUB program. The bill extends the deadline for terminating a program
agreement to December 31, 2024.
The OLS concludes that these provisions of the bill will result in an indeterminate increase in
State revenues. Exercising this option would prevent businesses that have been awarded tax credits
through the GROW and HUB programs from claiming any credits not issued prior to termination.
Any requested, but uncertified or unissued, tax credits would be forfeited in consideration of the
termination. Assuming these businesses remain New Jersey taxpayers, they would have increased
tax liabilities in the tax years or privilege periods following termination of the incentive agreement.
Information available through the Economic Development Authority indicates that about 30
program agreements have been terminated through the end of calendar year 2023.
Incentive agreement termination is available for all projects demonstrating changes to their
business model, real estate decision making, and job declines related to the COVID-19 pandemic.
Businesses may terminate their incentive agreement with no ongoing compliance requirements.
Tax credits already awarded to businesses are not subject to recapture. Applicants must explain
that the impact of the public health emergency result in changes to the business, business model,
or the continued to desire to participate in GROW or HUB. Once executed, a termination
agreement cannot be amended by the authority or the business. Incentive termination agreements
include a provision allowing the Economic Development Authority to seek recapture of any tax
credits if it is determined that a business’ decision to leave the program was made without
consideration of COVID-19.
Temporary Suspension of Program Obligations. The bill extends the time allowed under
current law for a business to suspend its obligations under a GROW tax credit, and to extend the
term of eligibility for the same period of time. Current law allows a suspension of a business’s
obligations for the 2020, 2021, 2022, and 2023 tax periods. The bill extends this provision to
include the 2024 tax period as well. The bill also extends the ability of a business to suspend its
obligations under the HUB program for the same period of time being afforded to GROW program
participants.
The OLS concludes that these provisions of the bill would have an indeterminate impact on
State revenues. Although the bill allows for the suspension of participants’ eligibility for tax
credits during certain tax periods, it also extends the period of time for which a business that makes
this election is eligible for tax credits. This extension would allow businesses to remain eligible
to receive tax credits for a longer period of time than allowed under current law. The overall
impact of this provision on State revenues will be driven by taxpayer decisions to claim tax credits
in future tax years. The OLS cannot predict how individual taxpayer decisions will impact State
finances in this regard. Information available through the Economic Development Authority
indicates about 40 requests to suspend program obligations were approved through December 31,
2023.
Businesses participating in the GROW and HUB programs may receive tax credits for a period
of up to ten years. Under current law, businesses participating in the GROW and HUB programs
may carry forward unused tax credits for 20 successive tax periods. Given that current law allows
these businesses to suspend GROW and HUB program requirements for four years and the bill
allows the suspension period to be extended for one additional year, the tax credit carry forward
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period for businesses that elect to suspend the GROW and HUB programs may be extended for up
to five additional years.
Application of Tax Credits. The bill provides that a tax credit may first be taken by the tax
certificate holder for the tax period for which it was issued, for the tax period in which it was
issued, or any tax period during the time the business is required to maintain the project at a
location in New Jersey set forth in the incentive agreement. A tax credit that is transferred may
first be taken by the tax certificate holder for the tax period for which it was issued, for the tax
period in which it was issued, or in any of the next three successive tax periods. The bill permits
a tax credit holder or transferee to first use a tax credit in the tax period in which it was issued or
in succeeding tax period without being required to file an amended tax return for the tax period for
which the tax credit was issued.
The OLS concludes that these provisions of the bill would have an indeterminate impact on
State revenues. Generally, these provisions allow taxpayers to begin applying tax credits later than
currently allowed. The Economic Development Authority currently requires taxpayers to begin
applying their tax credits in the tax credit “vintage year,” which is the tax period in which the
authority approves a tax credit application. However, there is generally a lag between the year in
which a tax credit application is approved and the year in which a taxpayer receives a tax credit
certificate because the authority determines that the taxpayer qualifies for the tax credit because
they met the requirements of the incentive agreement. In order to being utilizing their tax credits,
a taxpayer would have to file an amended tax return for the tax credit vintage year. The bill allows
taxpayers to start utilizing tax credits in the in tax periods after the vintage year. The overall impact
of these provisions on State revenues will be driven by taxpayer decisions to claim tax credits in
future tax years.
Utilization of Tax Credits in Equal Installments. The bill also amends the statutes governing
the Business Retention and Relocation Assistance Program and the HUB program to provide that
no more than the amount of tax credits equal to the total credit amount divided by the duration of
the eligibility period in years may be taken in any period. This restriction on the application of tax
credits under GROW was added by P.L.2014, c.63.
Current law includes constraints on the application of tax credits, which constraints vary by
program. The regulations governing the Business Retention and Relocation Assistance Program
provide that tax credits awarded through the program are to be applied over a period of one to six
years, depending on the number of full-time employees relocated or retained. Current law requires
HUB tax credits to be taken in equal installments over a ten-year period. The amount of a HUB
tax credit that exceeds a business’s tax liabilities for the tax period may be carried forward for use
in the next 20 successive tax periods.
The OLS concludes that these provisions will have an indeterminate impact on State revenues.
The bill does not increase or decrease the total amount of tax credits that may be applied against
tax liabilities; instead, the bill limits the amount of tax credits that may be utilized in a tax period.
While these provisions may limit the State revenue loss in a fiscal year due to the application of
these tax credits against tax liabilities, they may cause the State to experience revenue losses over
a longer period of time that it otherwise would under current law. The OLS cannot provide a
specific estimate of the difference in the amount of tax credits that may be applied in a tax period
under current law and the maximum amount of tax credits that may applied in a tax period in a tax
year due to these limitations.
Additional Modifications to Incentive Agreements. P.L.2020, c.156 allowed a business that
entered into an incentive agreement under the GROW program